HOA Democracy

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

In evaluating buying a resort, one of the things I look at is governance. I look for a resort that is administered by an elected HOA controlled by the members. I certainly try to avoid those where the HOA is under the thumb of either the developer or management company. Some of the mini-systems seem to have one large association for all of their resorts. Large groups like that are often easy to control for a developer, as opposition is exceedingly difficult to organize in a very large group. Amazingly, there are some resorts out there without an HOA at all, such as Canaltime.

On the OBX, most of our t/s resorts are democratically governed, although in some cases such as the First Flight resorts, the homeonwers had to band together and hire lawyers to sever the tenacles of the developer (one of them, Dunes South, even went all the way to the state Supreme Court). The Barrier Island Station group is the only one still under the thumb of the developer, and at their two sold out resorts, continuing developer control violates their Declaration of Covenants. Another, Dunes South, has fallen under the thumb of its management company. Sea Ranch II has recently hired a management company with a reputation of being very controlling, VRI, but it is too early to determine if this may undermine its democratic governance.

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

I would say that a strength of non-point or non-resort group systems is the independent control of the Boards of the HOA. I agree with that point. In the bylaws and trust agreements that I have read in various point systems, most either guarantee majority control of the board of trustees to the developer or are structured in a way that guarantees it. When you are buying from a large developer, you are buying into trusting them to manage your assets properly. That can be good or bad depending on whether or not your trust the developer.

I would also say that one of the greatest weaknesses of HOAs is that they are for the most part not for profit organizations. Not for profit organizations tend to underperform their for profit counterparts. But, an HOA that is fortunate enough to have owners who are active and can persuade highly talented board members to engage can do well. But, this will tend to not be the general case.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

Maybe it is different in other areas, but on the OBX, the HOA's have not had a problem with having qualified and active people serve on HOA boards, with the exception of one where the management company handpicks complacent yes-people for its board, and of course the BIS developer-dictated boards. I am also pleased with the competent mangement of my European and South African resorts by elected boards.

When a developer or management company controls a board, it is always going to put its interests first and those of the members second.

I would say that a strength of non-point or non-resort group systems is the independent control of the Boards of the HOA. I agree with that point. In the bylaws and trust agreements that I have read in various point systems, most either guarantee majority control of the board of trustees to the developer or are structured in a way that guarantees it. When you are buying from a large developer, you are buying into trusting them to manage your assets properly. That can be good or bad depending on whether or not your trust the developer.

I would also say that one of the greatest weaknesses of HOAs is that they are for the most part not for profit organizations. Not for profit organizations tend to underperform their for profit counterparts. But, an HOA that is fortunate enough to have owners who are active and can persuade highly talented board members to engage can do well. But, this will tend to not be the general case.

[Jya-Ning Silver Contributor Find all posts View Profile Close Jya-Ning]

Don't know. There are too many things inside a mini-system. In FF's case, there are old resorts purchased or carry over from old FF that may or may not in their mini-system, there is new resorts built by them and is definitely in their mini-system system for now. And there may have a master association that controls the whole development area that may have several management companies or developers. Since FF will continue build, they will want to maintain certain control. FF has total control in their trust that handle the mini exchange system, but has fewer control in the resort HOA (or POA) especially the older one or ones come from purchased. However there are enough people that purchase the system so they can go different place. So the home feeling is much less here. With owners all around place, it is hard to guarantee a qualified person actually will be elected to board. It also make easier for a developer or manage company try to gain support or control the board. Have to see if internet can crack this barrier.

If developer is done, it will be very hard and less incentive for them to try to control the HOA. But in a mini-system, it will mean it loss one of the most attractive feature.

Even with an owner controlled HOA, it does not guarantee the well operation or cost effective operation, and does not guarantee the HOA owner has the same interest as you. But it provides you a much less cost way to replace them if they can not do the job.

Even with developer controlled HOA, in this country, there are local laws and federal laws to monitor them. But most of the system is so complex for anyone to monitor them and it is very costly to do that or to replace them if they could not follow the guidence.

You have to choose which one is more attractive to you, make you feel more comfortable. In a mini-system, pick one you can trust, or the one that fit most of your need and you can tolerate their seperate goals.

Of course, if you buy all dirt cheap, it may not make much difference.

Jya-Ning

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

Maybe it is different in other areas, but on the OBX, the HOA's have not had a problem with having qualified and active people serve on HOA boards, with the exception of one where the management company handpicks complacent yes-people for its board, and of course the BIS developer-dictated boards. I am also pleased with the competent mangement of my European and South African resorts by elected boards.

When a developer or management company controls a board, it is always going to put its interests first and those of the members second.

That's true, but just because you are second doesn't mean you'll always lose. Sometimes being second in one game is better than being first in another.

If someone didn't believe that, then that person wouldn't work for a company or invest in stocks. In general, a business owner will ensure that their needs are taken care of before their employees or customers. And yet people buy from companies or work for employers because being number 2 or 3 on the priority list beats being number 1 in their own company or making their own product.

The key decision point is risk vs. reward vs. required effort, not needs priority. There are all types of situations where the equation for these items work when your priorities aren't number 1.

For those altruists out there that may believe that shareholders don't view their needs ahead of employees or customers, I encourage you to be an executive in a company that deals with shareholders. It ain't fun. I have been an executive in publicly traded companies, VC based start ups, Private Equity based funded companies and the common thread in all of those companies is that the shareholders care about return on their investment. They only care about customers and employees to the extend they increase that return on investment.

All things being equal, I would choose a company run by a strong and independent board. But, I don't limit my choices by that critieria. I make a risk vs. reward. vs. effort assessment and board independence is but one criteria in that mix.

[Jya-Ning Silver Contributor Find all posts View Profile Close Jya-Ning]

If someone didn't believe that, then that person wouldn't work for a company or invest in stocks.

On the other hand, a public trade company has to report to SEC, which is the first line of monitor system and defense system.

Maybe that is one of the reason some of the TS is sell at a price even below the comparison RS value. Risk is too high. Reward can easily be spoiled if there is something bad happen in the trip.

Jya-Ning

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

Byron Wiegand had an excellent article on this subject in the latest issue of Timesharing Today, entitled ''It's Your property; get involved!''

A quote: ''If you have an entrenched Board of Directors where the management company is in control, your association is in serious trouble. . . .
If your Association is full of 'Sheeple', you will get fleeced every year as long as you own.''

[BocaBum99 Super Moderator Find all posts View Profile Close BocaBum99]

I value risk adjusted return on investment above all else. I am willing to accept the risk of a developer controlled board if it yields me a higher return on investment.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

I value risk adjusted return on investment above all else. I am willing to accept the risk of a developer controlled board if it yields me a higher return on investment.

Read Byron's article. He explains the conflicts of interest that mean that you probably would actually get a lower return.